LBO Model Question - Fair value?
In a real-world lbo model, do you bother to mark the target's balance sheet to fair value? Or is it more trouble than it's worth?
Just wondering what is done in practice.
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You'll get lawyers and accountants to do an estimate of it when you're acquiring a company and doing a step-up in an asset purchase, for instance. Never had to do it in banking though.
The step-up with a 338 or pure asset purchase will have (could have I should say) implications on the acquirers tax basis which can have a big impact on your B-Tax / A-Tax val. delta. However, in a standard LBO modeling situation, you're only concerned w/ debt service and mandatory repayment so it's less of an concern.
It'll impact your amortization and therefore the amount of cash taxes you need to pay
you will have that as part of the model but won't usually need to come up with the figures on your own unless you use some basic assumptions.
I've never done it.
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